more on why should we ever trust corporation -- BP Named in Inquiry on Pricing - New York Times

[David Farber <dave () farber net>]

Begin forwarded message:

From: Gerry Faulhaber <gerry-faulhaber () mchsi com>
Date: June 29, 2006 9:45:31 AM EDT
To: dave () farber net
Subject: Re: [IP] why should we ever trust corporation -- BP Named in  
Inquiry on Pricing - New York Times

I was really surprised to see this article; "cornering the market" in  
a commodity is almost always unprofitable, unless there's a truly  
scarce bottleneck somewhere (as with diamonds, but not propane).  I  
have no doubt that people try to do it, but they usually fail.

I was heartened to read the last paragraph of the full article, which  
should have been much more prominent: "In the end, the strategy  
failed to reap the estimated gains because the high cost of building  
up a dominant position was higher than the profits that were realized."

Good for the feds, but it is really the market that thwarted this ill- 
conceived scheme.

Professor Gerald R. Faulhaber
Business and Public Policy Dept.
Wharton School, University of Pennsylvania
Philadelphia, PA 19104
Professor of Law
University of Pennsylvania Law School
----- Original Message -----
From: David Farber
To: ip () v2 listbox com
Sent: Thursday, June 29, 2006 7:50 AM
Subject: [IP] why should we ever trust corporation -- BP Named in  
Inquiry on Pricing - New York Times


http://www.nytimes.com/2006/06/29/business/29propane.html? 
hp&ex=1151640000&en=8ed0d0dffad1dad2&ei=5094&partner=homepage

BP Named in Inquiry on Pricing

By JAD MOUAWAD
Federal regulators charged yesterday that BP manipulated the price of  
propane two years ago by cornering the market through its dominant  
position, pushing up heating costs for millions of households at the  
peak of winter demand.

The Commodity Futures Trading Commission charges that at least six  
current and former employees at a unit of BP North America squeezed  
the propane market in February 2004, according to a civil complaint  
filed in federal court. They sought to make at least $20 million in  
profits, it said.

Also, the Justice Department said yesterday that one trader named in  
the lawsuit pleaded guilty to a conspiracy charge in a parallel  
criminal case. The plea is part of a continuing investigation by the  
F.B.I.

"BP cornered the market on physical propane," said Gregory G. Mocek,  
the director of the enforcement division of the trading commission, a  
federal regulator that oversees commodity markets. "They used their  
financial power to drive up prices."

,snip.

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